Correlation Between Vanguard World and International Business
Can any of the company-specific risk be diversified away by investing in both Vanguard World and International Business at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard World and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard World and International Business Machines, you can compare the effects of market volatilities on Vanguard World and International Business and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard World with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard World and International Business.
Diversification Opportunities for Vanguard World and International Business
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and International is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and Vanguard World is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard World are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Vanguard World i.e., Vanguard World and International Business go up and down completely randomly.
Pair Corralation between Vanguard World and International Business
Assuming the 90 days trading horizon Vanguard World is expected to under-perform the International Business. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard World is 1.73 times less risky than International Business. The etf trades about -0.13 of its potential returns per unit of risk. The International Business Machines is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 436,300 in International Business Machines on September 13, 2024 and sell it today you would earn a total of 33,700 from holding International Business Machines or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard World vs. International Business Machine
Performance |
| Timeline |
| Vanguard World |
| International Business |
Vanguard World and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard World and International Business
The main advantage of trading using opposite Vanguard World and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard World position performs unexpectedly, International Business can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in International Business will offset losses from the drop in International Business' long position.| Vanguard World vs. Vanguard Funds Public | Vanguard World vs. Vanguard Specialized Funds | Vanguard World vs. Vanguard World | Vanguard World vs. Vanguard Index Funds |
| International Business vs. Costco Wholesale | International Business vs. Grupo Hotelero Santa | International Business vs. Monster Beverage Corp | International Business vs. Cognizant Technology Solutions |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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